By Daniel Lanyon on Wednesday 22 June 2016
A new closed-ended fund Hadrian’s Wall Secured Investments has raised £80m versus a targeted £150m in the first listing of an investment trust on the London Stock Exchange in 2016 so far.
The fund is targeting a yield of 6 per cent and a total return of 7-8 per cent by offering exposure to alternative credit loans to UK SMEs secured by underlying assets and collateral. Loans target mid-market sized firms with annual revenue between £1m-£25m.
It therefore sits between the likes of P2P Global Investments and VPC Speciality Lending investment trusts which tend to have a majority of focus towards consumers - and larger institutional direct lenders which tend to lend to firms with annual revenues above £100m.
Loans will be secured by a range of assets, including equipment, plant and machinery, real estate and trade receivables.
There are now a small cadre of altertative credit investment trusts seeking to take advantage of the burgeoing market for credit originated either by non-bank platforms or via direct loans to businesses. These include the £868m P2P Global Investments, £381m VPC Specialty Lending, £157m Ranger Direct Lending, £147m Funding Circle SME Income, £100mm Honeycomb and £53.2m GLI Alternative Finance.
P2P GI was to launch two years ago, followed by VPC Speciliaty Lending. They were quickly snapped up by institional investors, reflected in double digit premiums to their net asset values [NAVs]. However, today many now trade on discounts to their NAVs.
Hadrian Wall's prospectus highlighted that Old Mutual Global Investors had intended to subscribe for 50m shares at IPO, up to a maximum of 25 per cent of share capital. Paul Craig, who heads OMGI's Cirilium ranger of fund of funds, has taken up a board positon on Hadrian's Wall.
The fund aims to take advantage of ongoing financial disintermediation by investing primarily in UK SME loans secured by a range of assets, including equipment, plant and machinery, real estate and trade receivables.
The types of loans that the company will target include equipment finance, property development and general commercial loans to businesses.
The management of thr trust estimate full deployment will take six months. Leverage is limited to 33 per cent of net assets at drawdown, but is not normally expected to exceed 20 per cent.
The company is led by Marc Bajer, Joseph Dlutowski and Mike Schozer. Marc Bajer and Mike Schozer were previously CEO and president of Assured Guaranty Corp, respectively, While Jospeh Dlutowski was chairman and owner of CapQuest, a UK Consumer Debt firm.
Fees are 1 per cent per annum of invested assets until the fund is 90 per cent invested, after which it will become 1 per cent of net asset value [NAV].